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OTC Bitcoin Trading: How to Keep Whales Happy

The Tokyo Whale Strikes

Nobuaki Kobayashi, head attorney for the Mt. Gox trust, has been dubbed the “Tokyo Whale”. Between late September 2017 and March 2018, the trust flooded the Bitcoin and Bitcoin Cash markets with almost NZD$570 million dollars’ worth of coins.

Noticing this massive increase in liquidity, people started panic selling, causing prices to drop further and further (slippage). Bitcoin investors were not happy with Kobayashi at all. The community expressed their anger on Reddit over this “market flooding” at a time when prices were already under pressure.

But, if you want to buy or sell large amounts of Bitcoin, how can you do so without swinging the market? How do you avoid causing an uproar in the cryptosphere?

The answer is simple: over-the-counter Bitcoin trading.


What is OTC Trading?

Over-the-counter (OTC) trading is a service used by high-volume traders looking to buy or sell large amounts of cryptocurrency. A “large amount” is a loose term; it’s used to describe transactions of 25BTC or more by some, or 100BTC or more by others.

Generally, large purchases of crypto don’t take place on traditional exchanges to avoid problems with slippage. OTC facilitators act as liquidity providers by holding large amounts of crypto themselves, or by connecting buyers to sellers who do.

There are several different OTC service types available such as Bitcoin ATMs, chatrooms, and brokers. We will delve into what these are shortly but first, why do we need OTC services?


Why Bother with OTC Bitcoin Trading?

Hedge funds, family offices, private wealth managers, or high-net-worth individuals tend to place large volume trades. The reasons to use OTC services as opposed to an exchange are simple: better prices, faster transactions, and decreased risk (depending on the OTC provider’s reputation, obviously).


1. Price

OTC trades provide the benefit of one, upfront, fixed price for the entire amount of BTC you wish to buy or sell. Conversely, large trades on an exchange are made up of multiple smaller transactions which generally increase in price. To illustrate this, a significant trade on (21/03/18), of 339.85 BTC, required 2,383 transactions to process. Placing a substantial-sized order on an exchange can result in the entire market shifting up or down, which may not be in your favour. As a result, the overall cost of the trade is higher because of slippage.


Cryptocurrency Slippage


2. Speed

OTC trades can be processed quickly as they aren’t subject to market liquidity on exchanges. You are merely transacting with one entity who holds the entire value you require (whether that be fiat or crypto).


3. Fewer counterparty risks

By using a trusted broker, you avoid the risks commonly associated with cryptocurrency exchanges. E.g., hacking used to steal funds from exchanges such as the 2014 Mt. Gox attack with over NZD$600 million lost.



How can you do OTC Bitcoin Trading?

As mentioned earlier, there are several different types of OTC trade. Each follows three steps.

  • Firstly, find a counterparty to trade with.
  • Secondly, negotiate the details of the trade.
  • Lastly, complete the trade.


Bitcoin ATMs

Bitcoin ATMs allow users to convert fiat into crypto directly. In New Zealand, there is currently one in Auckland and one in Dunedin. Unfortunately, transactions on the machines here are capped at NZD$6000 per day. You can read more about the 3000+ ATMs available worldwide on Coin ATM Radar’s site.



The first major trade of BTC occurred on the Freenode IRC chatroom #bitcoin-otc. This form of OTC trading is more suited for advanced users as all interactions take place via Gribble bot. Gribble bot uses commands to enter orders e.g. ;;buy 100 BTC at "0.9 * {bitstamplast}" PPUSD . There is no automatic system in place to match buyers and sellers. Furthermore, you must negotiate with the counterparty directly. This directness means you have to ascertain the level of risk for trading with a particular party yourself.



A broker may charge you a fixed fee to negotiate the terms of the trade on your behalf. This type of broker is known as an inter-dealer broker. Alternatively, a broker may act as the counterparty, providing the liquidity for the trade themselves. This type is known as "principal" OTC trading, and the fee charged is to cover the broker's risk safely.

In essence, both types of broker take out the hard work involved with vetting counterparties and monitoring exchange fluctuation. Also, a broker makes the transaction more private as only involved parties are aware of the trade at the time.


OTC Bitcoin Trading vs Exchanges

OTC Bitcoin Trading vs Exchanges


Over-the-counter Bitcoin trading enables the movers and shakers of the cryptoverse to quietly and calmly conduct their business. It prevents the so-called “whales” from causing tidal waves of volatility in an already surging ocean. With large volume trades happening off exchanges, it allows markets to tick along nicely and minimises panicked trading decisions in the community. In conclusion, OTC Bitcoin trading benefits everyone in the long run by preventing market slippage while providing the best prices overall.


What are your thoughts on OTC Bitcoin trading in New Zealand? Let us know in the comments below.


Disclaimer: The above references an opinion and is for informational purposes only. It is not intended as personalised financial or investment advice. The opinions expressed by the author do not represent the opinion of BitPrime.

Last updated: 07/06/2018


2 thoughts on “OTC Bitcoin Trading: How to Keep Whales Happy

  1. Not a fan of Wall Street or other big whales in the world being able to do it this way. If value is to come into the market, it seems it must come in via the small investors. Once again it is the school of minnows that will be feeding the whales.
    If the market cap is increasing but not the price, wouldn’t that suggest they are buying directly off the miners??

    • Hi Richard,

      You raise a very interesting point.
      We can’t currently see the total value, can we? I don’t know if this is likely to ever change either?
      I guess the lesson I personally take from it is to just keep in mind that the values we see in the markets are only representative of a portion of the whole story.
      You may be right about some big players buying directly off miners. That’s a point I hadn’t really considered!

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